<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1999
Commission file number: 33-21508
DATALINK.NET, INC.
----------------------------------------------------
(Exact name of small business issuer in its charter)
Nevada 35-3574355
- ------------------------------- -------------------------------
(State or other jurisdiction of (IRS Employer Identification
Incorporation or Organization) Number)
1735 Technology Drive, Suite 790, San Jose, CA 95110
-----------------------------------------------------------
(Address of Principal Executive Offices including zip code)
(408) 367-1700
---------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
There were 3,498,433 shares of the Registrant's Common Stock outstanding as of
September 30, 1999.
Transitional Small Business Disclosure Format: Yes [ ] No [ X ]
<PAGE>
DATALINK.NET, INC.
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
a. Condensed Consolidated Balance Sheets
September 30, 1999 and March 31, 1999 3
b. Condensed Consolidated Statements of Operations
and Comprehensive Loss for the three and six month
periods ended September 30, 1999 and 1998 4
c. Condensed Consolidated Statements of Cash Flows
for the six months ended September 30, 1999 and 1998 5
d. Notes to Condensed Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. 15
ITEM 2. CHANGES IN SECURITIES. 15
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 15
ITEM 5. OTHER INFORMATION. 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K 15
SIGNATURES 16
EXHIBITS
INDEX TO EXHIBITS
EXHIBIT 27 FINANCIAL DATA SCHEDULE
2
<PAGE>
DATALINK.NET, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30 March 31
1999 1999
ASSETS (Unaudited)
Current Assets: ------------ ------------
Cash and cash equivalents $ 1,612,300 $ 3,169,443
Restricted cash 512,895 --
Trade receivables 43,758 63,319
Other receivables 4,236 6,372
Prepaid expenses 39,492 41,612
----------- -----------
Total current assets 2,212,681 3,280,746
Property and equipment, net 600,501 699,591
Other assets 57,229 76,730
----------- -----------
Total assets $ 2,870,411 $ 4,057,067
=========== ===========
LIABILITIES
Current liabilities:
Accounts payable $ 562,121 $ 617,456
Note payable to bank 512,895 --
Accrued expenses and other
current liabilities 216,643 220,919
Current portion of capital
lease obligation 14,684 14,004
Current portion of advances
on technology sales 416,096 432,022
Deferred revenue 216,917 332,212
----------- -----------
Total current liabilities 1,939,356 1,616,613
Capital lease obligation, net of
current portion 39,222 47,439
Advances on technology sales, net
of current portion 1,526,693 1,730,610
----------- -----------
Total Liabilities 3,505,271 3,394,662
----------- -----------
SHAREHOLDERS' EQUITY
Convertible Preferred stock 1,327 2,366
Common stock 34,985 24,143
Additional paid-in capital 28,091,489 28,084,147
Accumulated other comprehensive loss (81,080) (82,002)
Notes receivable (1,276,873) (1,261,675)
Accumulated deficit (27,404,708) (26,104,574)
----------- -----------
Total shareholders' equity (deficit) (634,860) 662,405
----------- -----------
Total liabilities and
shareholders' equity (deficit) $ 2,870,411 $ 4,057,067
=========== ===========
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
DATALINK.NET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited)
Three Months Ended Six Months Ended
September 30 September 30
----------------------- ------------------------
1999 1998 1999 1998
---------- ---------- ----------- -----------
Revenue $ 383,053 $ 509,121 $ 819,938 $ 1,096,656
Cost of revenue 225,801 219,047 424,936 432,344
Research and development 142,666 224,135 285,015 442,058
Sales and marketing 306,963 929,158 663,408 1,909,556
General and administrative 546,601 856,081 1,070,286 1,531,746
Other income (Note 3) 151,576 230,268 323,573 444,012
--------- ----------- ----------- -----------
Net loss available to
common shareholders (687,402) (1,489,032) (1,300,134) (2,775,036)
Other comprehensive
income (loss) -
Translation (2,210) 12,112 922 4,238
--------- ----------- ----------- -----------
Comprehensive Loss $(689,612) $(1,476,920) $(1,299,212) $(2,770,798)
========= =========== =========== ===========
Net loss per share
(Note 4):
Basic $ (0.21) $ (0.73) $ (0.45) $ (1.37)
Diluted $ (0.21) $ (0.73) $ (0.45) $ (1.37)
Shares used in per share
calculation, basic and
diluted 3,243,390 2,032,116 2,878,035 2,027,937
=========== ============ =========== ============
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
DATALINK.NET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended
September 30
---------------------------
1999 1998
----------- -----------
Cash flows from operating activities:
Net loss $(1,300,134) $(2,775,036)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 119,267 90,247
Foreign currency translation adjustment 922 4,238
Amortization of technology advances (219,841) (233,545)
Amortization of note receivable (15,198) 220,644
Changes in assets and liabilities:
Accounts and other receivables 21,697 17,777
Prepaid expenses and other assets 2,120 (31,165)
Accounts payable and accrued liabilities (59,611) 203,598
Deferred revenue (115,295) 178,368
----------- -----------
Net cash used in operating activities (1,566,073) (2,324,874)
Cash flows from operating activities:
Acquisition of property and equipment (20,177) (254,733)
Other assets 19,501 22,040
----------- -----------
Net cash used in investing activities (676) (276,773)
Cash flows from financing activities:
Proceeds from note payable to bank 512,895 --
Proceeds from sales of common stock 17,143 46,888
Payments on capital lease (7,537) (7,817)
----------- -----------
Net cash provided by financing activities 522,501 39,071
----------- -----------
Net decrease in cash and cash
equivalents (1,044,248) (2,562,576)
Cash and cash equivalents and restricted
cash, beginning of period 3,169,443 7,353,719
----------- -----------
Cash and cash equivalents and restricted
cash, end of period $ 2,125,195 $ 4,791,143
=========== ===========
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
DATALINK.NET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
1999 1998
--------- ---------
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest $ 4,295 $ 5,031
======== ========
Cash paid for income taxes $ 1,365 $ 9,771
======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Preferred stock converted to common
stock $ 1,039 $ --
======== ========
Common stock exchanged for accrued
expenses $ -- $ 18,176
======== ========
See accompanying notes to consolidated financial statements.
6
<PAGE>
DATALINK.NET, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. FORMATION AND BUSINESS OF THE COMPANY
Datalink.net, Inc., formerly Datalink Systems Corporation (the "Company") was
formed under the laws of the State of Nevada on June 18, 1996. On June 27,
1996, the Company went public through an acquisition of a public corporation,
Datalink Communications Corporation ("DCC"), which was previously Lord Abbott,
Inc., a Colorado corporation formed in 1986. Datalink.net provides Web-to-
Wireless[TM] services for Internet-based enterprises and for consumers seeking
wireless access to Internet content and information. Through its patented
XpressLink middleware platform, the Company constructs an array of information
products that address the needs of consumers and enterprises to receive and
distribute selective data to individuals using wireless devices such as
pagers, digital cellular phones, or PDA's (Personal Digital Assistants).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the six-month
period ended September 30, 1999 are not necessarily indicative of the results
that may be expected for the year ending March 31, 2000. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-KSB for the year
ended March 31, 1999.
3. OTHER INCOME
Other income (expense) consists of the following items:
Three Months Ended Six Months Ended
September 30 September 30
---------------------- --------------------
Description 1999 1998 1999 1998
- ------------------------ --------- --------- --------- --------
Owners fee sales
of technology $(392,500) $(392,500) $(785,000) $(785,000)
Interest on note from
sales of technology 392,500 392,500 785,000 785,000
Amortization of
technology advances 108,999 115,977 219,843 233,543
7
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Interest income 57,108 122,287 116,783 226,858
Miscellaneous (14,531) (7,996) (13,053) (16,391)
---------- ---------- ----------- ----------
Total other income
(expenses) $ 151,576 $ 230,268 $ 323,573 $444,012
========== ========== =========== ==========
4. CALCULATIONS OF NET LOSS PER SHARE
Three Months Ended Six Months Ended
September 30 September 30
------------------------ ------------------------
1999 1998 1999 1998
---------- ----------- ---------- -----------
Weighted average
common shares
outstanding for
the period 3,243,390 2,032,116 2,878,035 2,027,937
Shares used in per
share calculations 3,243,390 2,032,116 2,878,035 2,027,937
Net loss available to
common shareholders $ (687,402) $(1,489,032) $(1,300,134) $ (2,775,036)
Net loss per share $ (0.21) $ (0.73) $ (0.45) $ (1.37)
Calculated in accordance with the guidelines of Item 601 of Regulation S-B.
Primary and fully diluted calculations are substantially the same.
Common stock equivalents resulting from convertible preferred shares, warrants
and stock options amounted to 4,570,139 and 5,524,424 as of September 30, 1999
and 1998, respectively. These common stock equivalents are excluded from the
weighted average common shares outstanding for the periods because their
inclusion would be anti-dilutive.
5. NOTE PAYABLE
During the fiscal year ended March 31, 1999, Datalink.net entered into a Line
of Credit agreement with a financial services company. The credit line is in
the amount of $1,000,000 and is collateralized by funds on account at the
financial services company. At September 30, 1999, credit line borrowings
amounted to $512,895, resulting in a like amount of cash being classified as
restricted on the balance sheet of the Company.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the attached
financial statements and notes thereto. Except for the historical information
contained herein, the matters discussed in this document are forward-looking
statements that involve certain risks and uncertainties, including, among
others, the risks and uncertainties discussed below and in the Company's Form
10-KSB for the year ended March 31, 1999:
RESULTS OF OPERATIONS
The net loss available to common shareholders decreased during the three and
six month periods ended September 30, 1999 to $687,402 and $1,300,134
respectively, from $1,489,032 and $2,775,036 in the three and six month
periods ended September 30, 1998.
Revenues for the three and six month periods ended September 30, 1999 were
$383,053 and $819,938 respectively, as compared to $509,121 and $1,096,656 for
the like periods ended September 30, 1998. The revenue decreases resulted
from the Company's overall strategic re-positioning as an enterprise service
provider that involved major infrastructure changes -- namely a strategic
marketing shift away from media advertising and a shift in sales strategy from
direct to indirect sales channels. The virtual elimination of media
advertising effective January 1999 caused sales of the financial suite of
products to decrease, which in turn created a decrease in revenues. Despite
the immediate revenue downturn, the re-direction of marketing and sales
strategy is essential to the Company's increased emphasis on enterprise
wireless and two-way initiatives. The new focus on business-to-business
initiatives and indirect channel sales through marketing alliances with paging
and PCS carriers as well as retail stores offers excellent potential for
future revenues and ultimately profits. Due to the efforts involved in
setting up the infrastructure for these new products and services, however,
revenues have not yet begun to replace those lost from the direct channel
sales efforts.
Programs with previously announced indirect channel partners including SkyTel,
Arch/MobilComm, BellSouth Wireless and Office Depot are all in notable stages
of implementation, though have yet to result in any significant revenues to
date. SkyTel's sales initiatives for Datalink.net products have been in a
holding pattern during their recent acquisition, and are just now beginning to
be fully implemented. The Arch/MobilComm wireless information products are
now in a customer trial phase in limited areas and current indicators suggest
that these products will be rolled out across their service areas in January
2000. BellSouth Wireless, Office Depot and other retail sales have not been
meaningful to date and new marketing initiatives are being developed to assist
in sales of products through these indirect channels.
Business-to-business initiatives reflect not only strategic re-positioning in
terms of Company business model, including marketing and sales strategic
shifts, but also a re-directing of technological developments. Since the last
quarter, Datalink.net has acquired even greater protection of its core
technology through the issuance of a new patent. New technological
developments over the next year will focus on two-way and WAP-enabled products
consistent with third-generation PCS phones. This shift in technological
developments will synchronize with new marketing and sales strategies to
establish Datalink.net as the wireless application service provider for
Internet enterprises. Though still in developmental stages, business-to-
business initiatives continue to be seriously discussed between Datalink.net
9
<PAGE>
and major enterprises, including portals, web-based enterprises, and PCS
carriers and manufacturers. The movement of these enterprise initiatives out
of the development stage and into the implementation stage is expected to
ultimately result in a significant jump in future revenue.
COST OF REVENUES AND GROSS MARGIN
Cost of revenues has decreased during the six months ended September 30, 1999,
as compared to the prior year period, principally due to the decrease in net
revenues, but increased slightly for the three month period then ended, as
compared to the like three month period in the prior year. Cost of revenues
represents the direct costs necessary to provide the services to customers.
This cost is not directly proportional to revenues, and when revenues
decrease, as they have in the current quarter and six month periods, the cost
of revenues has not changed proportionally. Additionally, certain salary
costs totaling $8,250 and $16,500 were charged to cost of revenues for the
three and six month periods ended September 30, 1999 that were classified as
sales expenses in the prior year. Cost of revenues principally includes costs
to obtain data feeds from various exchanges, costs or pager rental or
depreciation and pager airtime for those customers without their own pagers,
and certain telephone, computer and other direct operational costs. The
following tables show the net revenues, cost of revenues and gross margin for
the three month and six month periods ended September 30, 1999 and 1998:
Three Months Ended September 30 Increase (Decrease)
-------------------------------- ---------------------
1999 1998 $ %
----------- ------------- --------- ---------
Net revenues $ 383,053 $ 509,121 $(126,068) (24.8)%
Cost of revenue $ 225,801 $ 219,047 $ 6,754 3.1 %
Gross margin $ 157,252 $ 290,074 $(132,822) (45.8)%
Six Months Ended September 30 Increase (Decrease)
------------------------------ ----------------------
1999 1998 $ %
----------- ------------ ---------- ---------
Net revenues $ 819,938 $1,096,656 $(276,718) (25.2)%
Cost of revenue 424,936 432,344 (7,408) (1.7)%
Gross margin 395,002 664,312 (269,310) (40.5)%
OPERATING EXPENSES
Operating expenses have decreased during the three month and six month periods
ended September 30, 1999 from the same periods of 1998. The Company
categorizes operating expenses into three major categories: research and
development, sales and marketing and general and administrative. The tables
below summarize the changes in these three categories of operating expenses:
Three Months Ended September 30 Increase (Decrease)
------------------------------- ---------------------
Description 1999 1998 $ %
- ------------- ------------ ------------- ------------ --------
Research and
development $ 142,666 $ 224,135 $ (81,469) (36.3)%
Sales and
marketing 306,963 929,158 (622,195) (67.0)%
General and
administrative 546,601 856,081 (309,480) (36.2)%
------------ ------------ ------------ --------
Totals $ 996,230 $2,009,374 $(1,013,144) (50.4)%
============ ============ ============ ========
10
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Six Months Ended September 30 Increase (Decrease)
------------------------------ ----------------------
Description 1999 1998 $ %
- ------------ ----------- ------------ ------------ -------
Research and
development $ 285,015 $ 442,058 $ (157,043) (35.5)%
Sales and
marketing 663,408 1,909,556 (1,246,148) (65.3)%
General and
administrative 1,070,286 1,531,746 (461,460) (30.1)%
----------- ------------ ------------ --------
Totals $2,018,709 $3,883,360 $(1,864,651) (48.0)%
=========== ============ ============ ========
Research and development expenses are expenses incurred in developing new
products and product enhancements for current products. These expenditures
are charged to expense as incurred. The decrease in these costs is due
principally to additional personnel and consultants engaged in the prior year
period in the development of lifestyle and other new products, such efforts
having leveled off somewhat during the current periods. Additionally, last
year's periods included one additional management person.
Sales and marketing expenses consist of costs incurred to develop and
implement marketing and sales programs for the Company's product line. These
include costs required to staff and execute a sales and marketing strategy,
participation in trade shows, media development and advertising, and web site
development and maintenance. These costs also include the expenses of sales
personnel and a customer support call center. These costs have decreased
substantially in the quarter and six month periods ended September 30, 1999
from the periods ended June 30, 1998, due principally to elimination of
virtually all advertising during the current periods. This advertising
decrease amounted to a savings of approximately $550,000 and $1,150,000 for
the three and six month periods ended September 30, 1999.
General and administrative expenses include accounting and legal, including
the costs associated with being a publicly traded company, rent,
depreciation of furniture and fixtures and other fixed assets, administrative
personnel, and other overhead related costs. These costs decreased in the
current periods due in part to reductions in administrative and accounting
personnel and the cessation of non-cash costs associated with a loan
forgiveness agreement with the Company's chief executive officer, due to the
completion of the amortization of the loan forgiveness period.
NON-OPERATING REVENUES AND EXPENSES
Non-operating revenues and expenses are primarily made up of interest income
from invested cash, amortization of deferred revenue from technology sales
advances received in previous periods, and the owner's fees and offsetting
interest income recognized, related to the technology sales. The following
tables reflect the changes in other income (expense):
11
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Three Months Ended September 30 Increase (Decrease)
------------------------------- --------------------
Description 1999 1998 $ %
- ----------------- ------------ --------------- --------- --------
Owner's fee-sales
of technology $ (392,500) $ (392,500) $ 0 0 %
Interest income
sales of
technology 392,500 392,500 0 0 %
Amortization of
technology
advances 108,999 115,977 (6,598) (6.0)%
Interest income 57,108 122,287 (65,179) (53.3)%
Miscellaneous (14,531) (7,996) (6,535) (81.7)%
------------ ------------- ---------- ---------
Totals $ 151,576 $ 230,268 $ (78,692) (34.2)%
============ ============= ========== =========
Six Months Ended September 30 Increase (Decrease)
----------------------------- ---------------------
Description 1999 1998 $ %
- ----------------- ------------ ------------- ---------- ---------
Owner's fee-sales
of technology $ (785,000) $ (785,000) $ 0 0 %
Interest income
sales of
technology 785,000 785,000 0 0 %
Amortization of
technology
advances 219,843 233,545 (13,702) (5.9)%
Interest income 116,783 226,858 (110,075) (48.5)%
Miscellaneous (13,053) (16,391) 3,338 20.4 %
------------ ------------- ---------- ---------
Totals $ 323,573 $ 444,012 $(120,439) 27.1 %
============ ============= ========== =========
As reflected in the above tables, other than interest income, most other
income (expense) items have remained relatively constant. The amortization of
technology advances has decreased slightly due to the application of the
effective interest method of amortization on the balance. Interest income has
decreased because of the reduction of cash available for investment due to
cash utilized in operations, as reflected in the following table of Liquidity
and Capital Resources.
12
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LIQUIDITY AND CAPITAL RESOURCES
Sources and uses of cash during the six month periods are summarized below:
Six Months Ended September 30
------------------------------
Favorable
Product 1999 1998 Change
- --------------- ------------ ------------- -----------
Cash used in operating
activities $(1,566,073) $(2,324,874) $ 758,801
Cash used in investing
activities (676) (276,773) 276,097
Cash provided by
financing activities 522,501 39,071 483,430
------------ ------------- -----------
Net decrease
in cash and cash
equivalents and
restricted cash $(1,044,248) $(2,562,576) $1,518,328
============ ============= ===========
As of September 30, 1999, the Company had cash and cash equivalents and
restricted cash amounting to $2,125,195 exclusive of reserves on deposit with
our merchant bank of $48,775, which reserves may not all be immediately
available for usage. Additionally, the restricted cash of $512,895 is
available for usage only upon repayment of a note payable to a financial
services company in a like amount. The remainder of cash and cash equivalents
available for usage amounted to $1,612,300. Cash, cash equivalents and
restricted cash decreased $1,044,248 during the six months ended September 30,
1999 principally due to the net loss for the period of $1,300,134 offset
somewhat by credit line borrowings amounting to $512,895. The Company has not
yet generated sufficient revenues to cover the cost associated with product
support and development, marketing and sales, and administrative costs, as the
Company is continuing to develop its markets as mentioned under Results of
Operations. There are no material advertising contracts or commitments for
capital expenditures at September 30, 1999. As mentioned above, the Company
has borrowed $512,895 during the six month period from a financial services
company, against cash deposits. While working capital appears adequate for
the remainder of the fiscal year, management anticipates the need to raise
additional funds during this period in order to fund new marketing and
development initiatives and to insure adequate working capital for continued
expansion.
YEAR 2000 COMPLIANCE
The Company is aware of the issues associated with the functioning of the
programming code in computer systems as the Year 2000 approaches. The Year
2000 issues result from the inability of some computer programs to distinguish
the year 1900 from the year 2000. Many computer programs and operating
systems were written using two digits to define the applicable year rather
than four digits. This means that any equipment containing computer programs
with time-sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. In some instances, this could result in system
failures, disruption in operations and possible inaccuracies of data.
The Company does not use mainframe computers in its internal operations.
Consequently, it does not have the extent of Year 2000 issues of other
companies that depend on what is commonly know as "legacy" systems. The
Company uses PCs and "server class" systems in its operations and the
operating system for its software platform and technology is Microsoft Windows
NT.
13
<PAGE>
Phase I of the Company's Year 2000 initiative has been to substantially
complete an inventory of all its IT and non-IT systems and equipment, and
based on this inventory, review its IT and non-IT proprietary systems and
contact its significant vendors to determine how their IT and non-IT products
and services might be effected by the Year 2000 issues. The Company's review
of its internal systems has resulted in the Company's determination that its
proprietary IT and non-IT systems meet the compliance requirements of the Year
2000. Ninety percent of the Company's vendors have provided statements that
their IT and non-IT systems are Year 2000 compliant. The Company continues to
collect statements from the remaining ten percent of its vendors.
The Company anticipates that there will be little or no Year 2000 issues and
therefore little or no cost will be incurred therefrom. However, although
compliance confirmation has been provided by ninety percent of the Company's
vendors, and the remaining ten percent have indicated that they are currently
Year 2000 compliant, there can be no assurance that these vendors will not
experience some level of Year 2000 issues that in some way may have an adverse
effect on the Company's systems. The level of risk related to this occurrence
has been assessed as very low. The Company's contingency plan in the event
that an unforeseen Year 2000 issues should occur will be to change to another
vendor that is Year 2000 compliant. For this reason, Phase II of the
Company's Year 2000 initiative is to develop an inventory of back-up vendors
for each vendor whose systems are currently used so that if a current vendor
develops a Year 2000 issue, the back-up vendor may be called upon to provide
services in accordance with Year 2000 compliance standards.
14
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS - None.
ITEM 2. CHANGES IN SECURITIES
The Company issued securities which were not registered under the Securities
Act of 1933, as amended, as follows:
During the quarter ended September 30, 1999, the Company issued a total of
24,165 shares of its common stock to Private Placement Warrant holders in
exchange for a total of 193,320 Private Placement Warrants to purchase shares
of the Company's common stock pursuant to a "Warrant Exchange Offer" which was
filed electronically with the Securities and Exchange Commission on August 25,
1999 and which terminated on September 23, 1999. Also, the Company issued
831 shares of its common stock to Agent Warrant holders in exchange for a
total of 4,984 Agent's Warrants pursuant to a "Warrant Exchange Offer" which
was filed electronically on August 26, 1999 with the Securities and Exchange
Commission and which terminated on September 24, 1999.
With respect to these transactions, the Company relied on Sections 3 (a)(9)
and/or 4(2) of the Securities Act of 1933, as amended. The investors were
given complete information concerning the Company. The appropriate
restrictive legend was placed on the certificates and stop transfer
instructions were issued to the transfer agent.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None.
ITEM 5. OTHER INFORMATION - None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K.
A) Exhibits:
Exhibits 27 - Financial Data Schedule
B) Reports on Form 8K
None
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATALINK SYSTEMS CORPORATION
Date: November 15, 1999 By: /s/ Anthony N. LaPine
Anthony N. LaPine, President and
Chief Executive Officer (Principal
Executive Officer)
By: /s/ William Mahan
William Mahan, Chief Financial
Officer (Principal Financial Officer)
16
<PAGE>
<PAGE>
INDEX TO EXHIBITS
EXHIBIT METHOD OF FILING
- ------- -------------------------
27. Financial Data Schedule Filed herewith electronically
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheets and statements of operations found on pages 3 and 4 of the
Company's Form 10-Q for the year to date, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 2,125,195
<SECURITIES> 0
<RECEIVABLES> 55,255
<ALLOWANCES> (7,261)
<INVENTORY> 0
<CURRENT-ASSETS> 2,212,681
<PP&E> 1,113,534
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0
1,327
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</TABLE>
